Türkiye’s Trade With The GCC: 2023/24 Status and Prospects

A more considered approach to the Middle East from Ankara is driving multilateral trade and investment forward into developments worth tens of billions of dollars

By Farzad Ramezani Bonesh with additional commentary by Chris Devonshire-Ellis

The foundations of the economic and trade relations between Turkiye and the Gulf Cooperation Council (GCC) states were laid in the 1980s, however, the foreign policy approach of the recently elected Justice and Development Party has led to the intensification of Turkiye’s relations with the GCC.

The GCC is an economic bloc that includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.

Relations between Turkiye and the GCC countries effectively started with the signing of the “Economic Cooperation Agreement” in May 2005 in Bahrain. The signing of the Memorandum of Understanding to establish a strategic dialogue mechanism in September 2008, and the establishment of 11 sub-committees such as trade and investment, strategic cooperation council, and complementary economic structures offered a foundation to deepen these ties.

Turkiye has paid attention to the GCC in finding new export markets and attracting foreign capital and announced an action plan to strengthen relations in many areas. However, because of the impact of the Arab Spring, the increase of security concerns, the expansion of the disagreements between Riyadh and Ankara, the competition in the leadership of the region, and divisions at the time within the GCC, the relationship faced hurdles in moving ahead. The situation has since improved.

After the resumption of Ankara’s full relations with Abu Dhabi and Riyadh, the GCC and Turkiye are now actively seeking to strengthen economic and trade relations. The GCC Council of Ministers resumed strategic talks with Turkey in March this year and approved the 2027-2023 Joint Action Plan.

Also, at the GCC-Turkiye Economic Forum (November 2023) in Istanbul, around 200 top officials focused on developing economic cooperation and investment opportunities in sectors such as energy, trade, banking, finance, tourism, agriculture, and food security.

These dynamics may now accelerate Turkiye’s Free Trade Agreement (FTA) negotiations with the GCC. Ankara signed a bilateral Closer Economic Partnership Agreement (CEPA) with the UAE, effective from September this year, with this being seen as a precursor to a larger GCC deal.

Turkish foreign policy towards the GCC has been established on key elements such as cooperation, participation, and respect for sovereignty, independence, and territorial integrity. Also, promoting regional and international cooperation, stability, and prosperity all among the guiding principles of Turkiye’s foreign policy.

In fact, geopolitical changes and many international and regional reasons have paved the ground for economic growth. The GCC and Turkiye are preparing for a lesser role of the United States in the region. Using trade and investment to expand relations is a mutual diplomatic trend.

The Turkish International Cooperation and Development Agency (TIKA), the Board of Foreign Economic Relations (DEIK) and the Joint Trade Councils all play an important role in Turkiye’s multidimensional economic and trade approach to the GCC.

From the point of view of the GCC, Turkiye is one of the largest economies in the region, with Ankara wanting to attract investments from the GCC. A sign of this strategy was President Erdogan’s fund-raising trip to the Middle East in July, which was intended to help prop up the ailing Turkish economy. He raised US$50 billion of investments.

By depending on energy imports in its energy policy, Turkiye pays attention to further strengthening its strategic position and creating diversity. This also has the effect of creating some dependency on good relations with the Middle East.

Türkiye however also wants to be a service provider to Europe; and aims to be the center of energy trade in the region. The rich energy resources of the GCC can be a source for Turkiye’s energy supply, strengthening energy transit and other cooperation opportunities. Ankara expects Turkiye’s service exports to reach US$200 billion by 2028 and in this regard, it relies on the construction potential of Turkish contractors in the GCC. Russia will also be a supplier to this Turkish gas hub, with its exports mixed with other gas imports and then sent on to the EU. This allows for the delivery of a better overall product (not all natural gas is the same quality) while allowing EU politicians to claim they are not buying energy from Russia.

The large technical engineering market is an important opportunity for Turkish companies and Ankara has also focused on expanding the presence of GCC businesses in Turkiye. Water and food sectors and agriculture have acquired a strategic dimension and the strategic importance of a sustainable supply of agricultural products is attractive.

Turkiye’s goal in developing a positive economic outlook is one of Ankara’s incentives to reduce tensions with the GCC. The GCC countries accounted for US$15.8 billion of foreign direct investment in Turkiye from 2020 to 2022.

Qatar invested US$9.9 billion, the UAE US$3.4 billion, and Saudi Arabia US$500 million. The UAE, Qatar, and Saudi Arabia deposited capital into Turkiye’s central bank to support dollar liquidity when the Turkish Lira was under significant threat of collapse. Turkiye also wants to provide a financial and commercial center for GCC investors and emphasizes the significant growth of mutual investments.

The GCC countries have strengthened their outbound investments, and the GCC’s vast foreign reserves provide a solid basis for participation. The low price of Turkish defense products is an important motivation. The purchase of shares of Turkish military industries, mutual investment in defense industries, and the possibility of further direct investment into Turkiye’s defense sector are all increasing.

Turkiye’s exports to the GCC over the past 20 years have increased from US$1.2 billion to US$9.5 billion dollars in 2023, with Turkish imports now at US$13.3 billion, up from less than US$1 billion two decades ago. Turkiye’s overall trade volume with the Persian Gulf has reached US$22 billion, with Ankara committed to tripling this figure by 2030.

Turkiye – Bahrain Trade

Since the establishment of diplomatic relations between Turkiye and Bahrain in 1973, relations between them have developed significantly. During the 2016 and 2017 visits, numerous economic agreements were signed. After Turkiye’s relations with Saudi Arabia began to decline, relations with Bahrain also suffered. However diplomatic contacts increased, and the two sides signed a memorandum of understanding to strengthen cooperation in the field of standardization.

Bilateral cooperation mechanisms include meetings of the Joint Economic Commission (JEC) of the Turkiye-Bahrain Business Council. In 2023 and the 50th anniversary of the establishment of relations, there are renewed opportunities to cooperate in banking, aviation, energy, hydrocarbons, and renewable energies.

In 2021, Bahrain exported US$344 million of products to Turkiye. The main products that Bahrain exported were raw aluminium, aluminium plating, and ammonia. In 2021, Turkiye exported US$173 million of products to Bahrain, and US$214.7 million in 2022, The main products that Turkiye exported to Bahrain were dairy products, eggs, honey, edible products, machinery, nuclear reactors, boilers, furniture, lighting signs, prefabricated buildings, pharmaceutical products, and auto components.

Türkiye – Kuwait Trade

Bilateral cooperation mechanisms include the meetings of the Joint Economic Commission, the meeting of Turkiye-Kuwait Joint Economic Commission, and the Turkiye-Kuwait Business Council.

The two sides are discussing the growth of military cooperation, the supply of advanced weapons such as drones (a contract worth US$370 million), and the possibility of establishing a Turkish military base in Kuwait. Turkish contracting companies have about 50 projects in Kuwait with a total value of about US$9 billion.

427 Kuwaiti companies have made investments worth billions of dollars in Turkiye, with a further US$2 billion dollars in other sectors pending. Kuwaiti tourists have purchased thousands of holiday homes in Türkiye. Visa exemptions for ordinary Kuwaiti passport holders from 2017 have added to the increase of Kuwaiti tourists.

The two countries are seeing positive development in their bilateral relations through the increasing economic, commercial, and investment cooperation between the two countries. Their bilateral trade volume increased by 33% and reached US$1.064 billion in 2022. Turkiye’s main imports from Kuwait are crude oil, petrochemical products, petrochemicals, plastics and plastic products.

During 2022, the main products that Turkiye exported to Kuwait were clothing, machinery, nuclear reactors, boilers, carpets and other textile floor coverings, furniture, lighting signs, and prefabricated building materials.

Turkiye – Oman Trade

Diplomatic relations between Oman and Turkiye were established in 1973. Bilateral cooperation mechanisms include a Joint Economic Commission and the Turkish-Oman Business Council, the Turkish-Oman Business Council, and Chambers of Commerce and Industry in both countries.

Bilateral trade between the Sultanate of Oman and Turkiye are witnessing steady growth and reached nearly US$2 billion in 2022. The total imports to Oman from Turkiye reached US$1.58 billion, while the total export value of Omani products to Turkiye has reached US$465 million.

About 35 Turkish companies have implemented projects worth US$7 billion in Oman. The establishment of a Turkish industrial zone in the Duqm special economic zone is underway.

Turkiye signed a natural gas purchase agreement with Oman to purchase 1.4 billion cubic meters of gas annually for 10 years in 2023.  Oman’s Vision 2040 is also an opportunity for cooperation. The tourism sector is also growing: the number of Omani tourists who visited Turkiye in 2022 was over 130,000.

In 2021, Oman exported goods to the value of US$984 million to Turkiye. The main products that Oman exported were nitrogenous fertilizers, raw aluminium, and propylene polymers. In 2021, Turkiye exported goods worth US$522 million to Oman, including furniture, lighting signs, prefabricated buildings, dairy products, eggs, honey, edible products, machinery, boilers, plastics, cereal, flour, starch, milk preparations, mineral fuels, oils, distillation products, and articles of iron and steel.

Türkiye – Qatar Trade

Qatar and Türkiye established bilateral relations in 1972. They have a strategic partnership and high potential, and since 2014, they have increased joint efforts to raise the level of trade and investment. The two side’s economic relations have seen continuous growth in the past few years, including bilateral cooperation mechanisms such as the meetings of the Joint Economic Commission, the Turkiye-Qatar Business Council, and the memorandum of understanding on investment support and promotion.

The two countries signed fifteen separate commercial and cooperation agreements in August 2017. Qatar has signed contracts with Turkiye on exporting LNG, tourism, real estate, food and agriculture, chemical and petrochemical products.

In 2015, the first meeting of the Joint Strategic Committee signed 15 agreements on maritime affairs, energy, science, and technology, education, and the environment. In 2018, Qatar announced a direct investment of US$15 billion, and in 2020, it increased the foreign exchange swap agreement to US$15 billion. In November 2020, Ankara and Doha signed 10 new agreements.

More than 180 Turkish companies operate in Qatar, with the total value of projects reaching investments worth an estimated US$17.4 billion dollars. The volume of Qatari capital investments in Turkiye has also increased, while Turkiye has become an important destination for Qatari tourists.

Qatar has also invested in various sectors in Turkiye, such as real estate and tourism. By December 2022, Qatar’s total investments in Turkiye had reached US$22 billion. About 120 Qatari companies operate in Turkiye, while there are hundreds of Joint-Venture companies with Qatari-Turkish capital in the private sector.

A CEPA trade partnership agreement between the two countries will be implemented at the end of 2023 following approval and ratification.

Meanwhile, the bilateral trade volume between the two countries has risen over the past two years by 1,828%, reaching US$8.1 billion in 2022, making Turkiye one of the most important trading partners of Qatar.

This recent development of trade activity is due to new direct sea lines, a number of signed agreements, and many investments. Qatar’s major imports from Turkiye include iron and steel, electrical machinery and equipment, construction services, tourism, tools and equipment, dairy and dairy products, and vegetables and fruits. On the other hand, Turkiye’s imports from Qatar include LNG and petroleum oils and their products.

See also: Türkiye & Qatar Sign New Trade Facilitation Deals

Türkiye – Saudi Arabia Trade

Relations between Türkiye and Saudi Arabia began in 1932. Relations have long fluctuated between cooperation and alliance to enmity and mistrust. In 2017, diplomatic relations suffered a severe blow after the grisly murder of a Saudi journalist at the Saudi Arabian consulate in Istanbul. A significant decline in economic relations resulted, although more positive signs have emerged since 2021.

The measures taken by the two countries to normalize relations and give priority to trade and economic investment is a very important development. After Turkish President Erdoğan’s visit to Saudi Arabia in April 2022, The Saudi Crown Prince Mohammed bin Salman visited Turkiye in June this year.

Apart from lifting an unofficial embargo on Turkish goods, this visit resulted in a joint statement on deepening relations, allowing Turkish companies to participate in Saudi government tenders, and signing deals especially in the food sector. The two leaders have subsequently met on other occasions.

Therefore, there was an increase and stimulation of business growth in sectors such as furniture, chemical products, carpets, hotels, construction, real estate, facilitating pilgrimages, and tourism.

Apart from the joint presence of the two countries in the World Trade Organization, the G20, and the Organization of Islamic Cooperation, cooperation mechanisms including the meeting of the Joint Economic Commission (JEC) and the Turkiye-Saudi Business Council, the formation of the Saudi-Turkiye Coordination Council in 2022 have improved and increased relations.

This year, business was extended due to the presence of a business delegation and more than 300 bilateral business meetings in Riyadh, 27 international exhibitions, discussions in August 2023 about the expansion of trade, the signing of eight trade agreements in different fields, the Saudi-Turkiye Business Forum (more than 450 companies from both countries attended ), the signing of several memorandums of understanding (MoU) in energy, direct investment and defense industries in July, and a joint investment agreement in the automation and engineering sector.

Riyadh’s desire to engage with the domestic and foreign private sectors, especially Turkish institutions, is in line with its national investment strategy, aimed at creating investments of US$3.3 trillion by 2030.

Türkiye’s investment includes 390 companies in Saudi Arabia with projects worth about US$660 million. In terms of the number of projects in Turkiye, Saudi Arabia ranks second among the GCC countries (after Qatar). Turkish companies have completed more than 100 projects in Saudi Arabia.

Saudi citizens have bought tens of thousands of properties in Turkiye. The number of Saudi companies operating in Turkiye exceeds 1,140 with investment volumes of US$11 billion, mainly in agriculture, real estate, and the energy sectors.

While Turkiye’s current account deficit has  reached unprecedented levels, Saudi Arabia deposited US$5 billion into Turkiye’s Central bank in March to help it get over its initial financial crisis.

In 2021, Turkiye exported US$274 million worth of goods to Saudi Arabia. In 2021, Saudi Arabia exported US$3.49 billion worth of goods to Türkiye. Bilateral trade between Saudi Arabia and Turkiye is expected to increase to US$6.5 billion by the end of 2023. Turkish shipping to Saudi Arabia increased more than 30 times in the period of January to February 2023.

Turkiye and Saudi Arabia plan to increase their trade volume to US$30 billion by the end of 2030. There are opportunities in infrastructure and construction to increase cooperation between the two countries in projects in the fields of technology, tourism, transportation, and energy.

Türkiye – UAE Trade

Political and ideological differences, including widespread tensions in relations, reduced Türkiye-UAE trade in 2018 following Ankara’s problems with Riyadh. However, since 2021, joint statements, mutual travel, and expansion of meetings between officials of the two countries signing more than a dozen agreements in the fields of energy, finance, and industry trade, increasing non-oil trade, have all played an important role in expanding recent relations.

The Turkish President’s visit to the UAE in February 2022 led to the signing of 72 agreements and memorandums of understanding in areas such as the exchange of financial information, energy, and customs agreements.

Apart from the activation of the Joint Economic and Trade Committee, the signing of the Comprehensive Economic Partnership Agreement (CEPA) moves the relationship towards increasing trade to US$40 billion in the next five years.

By using the CEPA, the two sides can benefit from each other’s logistics window position. Abu Dhabi and Ankara are increasing transit cooperation through the GCC-Iran-Turkiye transit corridor, (a Middle East continuation of the INSTC) the Iraq corridor, and air and airline cooperation.

In addition to CEPA, Turkiye and the UAE signed trade agreements worth US$50 billion during Erdogan’s July 2023 visit. The UAE provided financing of US$8.5 billion to assist with the rebuilding and other aid following the February 2023’s devastating earthquake in southern Turkiye, signed a US$3 billion credit facility to support Turkish exports, and established a Turkish Technology Fund.

Other major agreements were announced at the UAE-Turkiye Business Forum in Abu Dhabi in July 2023 between the two sides economic development bodies (ADDED and TIM), and between Abu Dhabi Alfa Holding and Limak Holdings, showing additional cooperation occurring across all industrial areas.

Ankara is looking for more UAE investment in Türkiye’s economy, and this has met with some success – the UAE announced a US$10 billion fund for investment in Turkiye earlier this year. Along with 13 investment agreements, the total investment balance between the two countries has increased to US$20 billion.

Emirati companies have invested billions of dollars in renewable energy, water and food safety, health, tourism, transport, infrastructure, and the Turkish financial sector, such as the partnership between DP World and Yibitaş Group, and the purchase of Denizbank by NBD.

There are also negotiations for the construction of a railway on the Bosphorus and investment in the Istanbul metro and high-speed railway.

The UAE is one of Turkiye’s most important trading partners in the Arab world, with bilateral trade expected to reach US$18.9 billion in 2023.  Raw gold, jewellery and the raw gold exported from the UAE to Turkiye in 2022 all accounted for significant volume. Turkiye’s exports to the UAE in 2022 amounted to US$5.6 billion, and mostly included raw gold and jewellery, pearls, precious stones, metals, coins, machinery, boilers, mineral fuels, oils, distillation products, vehicles, electrical and electronic equipment.

See also: Turkiye – UAE Bilateral Trade: 2023-24 Status and Prospects

The Turkiye – GCC Vision

The positions of Turkiye and the GCC on regional issues are different and have sometimes led to confrontation. The GCC’s internal disputes have also complicated the formation of a strong strategic partnership with Turkiye, while Ankara has sometimes signed measures and agreements with each member on a bilateral rather than multilateral basis.

However, many of the basic issues at the core of the dispute remain unresolved, and in the event of political tension again, economic relations may decrease, and investments along with these. However, recent developments dictate that Ankara prefers to maintain developing relations and this is likely to be the overarching motivation to agree to disagree on certain difficulties, rather than intensify discord as happened between the EU and Russia.

Turkiye-GCC relations have gained momentum with mutual visits and agreements in recent years. There is a lot of hope for the future of relations, the increase of the future trade volume, and the expansion of GCC investments into Turkiye to US$30 billion.

This is likely to be further developed as both Saudi Arabia and the UAE are joining the BRICS grouping from January 2024. Turkiye is expected to join in 2025, if so this will further assist with mutual trade development.

Turkiye and the GCC are scheduled to hold their sixth strategic discussion meeting in the first quarter of 2024. They are likely to resume negotiations on a free trade agreement and expand “strategic” relations. There are still opportunities for an institutional and stable relationship, and due to their economic, and geographical potential and numerous programs, cooperation in various sectors can gain more momentum.

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